Example: Say you’re scheduling a 10-day business trip to London. Currently, you plan on spending seven days on business matters and three days sightseeing. (Your business days include the two travel days to fly in and return home.) The roundtrip airfare costs $1,500.
At this point, only a portion of your airfare is deductible because you don’t meet any one of the four tests described in the story at left. So, your transportation deduction is limited to $1,050 (seven business days of 10 total days). The other $450 is not deductible. Of course, you can still deduct your lodging expenses and 50 percent of your meal expenses for your business days.
Strategy 1: Change your plans slightly— spend one less day sightseeing, for example—and you can deduct 100 percent of your airfare.
If the trip lasts a week or less, the day of departure doesn’t count as a day spent abroad. But the day that you return home does. For a trip lasting more than a week, both days count.
Strategy 2: Leave home at night and return in the morning, effectively adding two business days to your trip. Then, if you spend just one more day abroad on business, you’ll be spending less than 25 percent of your time (three of 13 days) on nonbusiness matters.
Note that if your plane makes a stop on U.S. soil, the portion of the trip within the United States is not subject to the allocation rule (assuming the overall purpose of the trip is for business).
Strategy 3: Book a flight that stops over within the United States but close to your foreign destination. Then, allocate the trip’s cost based on mileage. You can deduct 100 percent of the cost of travel within the United States and a percentage of the remainder, under the rules discussed above.
- Small Business Tax Deduction Strategies No matches